Tesla Motors Inc. (TSLA), which has almost tripled in market value this year, can make its electric cars efficiently enough to achieve a gross profit margin approaching Porsche SE’s, Chief Executive Officer Elon Musk said.
Tesla, based in Palo Alto, California, has set a goal of attaining a 25 percent gross margin this year, Musk told investors yesterday at the company’s annual meeting. Capital expenditures to expand Model S production and begin assembling the electric Model X sport-utility vehicle next year will hold back Tesla’s profitability, compared with that of Stuttgart, Germany-based Porsche, he said.
“I would expect our capex to be higher than Porsche’s for some time to come,” Musk, 41, said at the gathering, held at the Computer History Museum in Mountain View, California. “On gross margin, I think we can get close to exceeding Porsche’s over time.” Gross margin is the percentage of revenue that remains after production costs are deducted.
Porsche, which in past years had a gross margin of more than 50 percent on its luxury sports cars, was acquired by Volkswagen AG (VOW) and no longer reports that ratio separately. Tesla reported a 17 percent gross margin in the first quarter.
Tesla last month established its best financial footing since its founding a decade ago. The company’s first quarterly profit was followed by a top rating from Consumer Reports for the Model S sedan and a share-price surge. Investor demand created an opportunity to raise $1 billion from selling equity and debt and to retire a $465 million U.S. Energy Department loan nine years early.
The company’s cash position is “in great shape” after last month’s fundraising, Musk said.
The financing “gives us the ability, even if we basically suck at cash management, we’ll still do OK,” he said. “We don’t want to suck.”
Musk last week announced an expansion of the company’s supercharger stations that rapidly repower its all-electric cars to let customers drive across the U.S. from coast to coast by the end of the year.
The mood of the few hundred shareholders attending the Tesla meeting, led by the South African-born Musk, was upbeat.
“I’m very happy with the performance this year and the course they’ve laid out,” said Russell Kinsella, a Chicago-based small investor who initially bought Tesla shares in January 2012 for about $29 each. “I’m not going to be selling anytime soon.”
Tesla’s plan to offer lower-priced electric cars in a few years is important to generating higher revenue and becoming more of a mass-market company, Kinsella said.
Musk also said the company, named for inventor Nikola Tesla, is willing to let electric vehicles from other automakers use its supercharger network.
“There would have to be some compensation” for Tesla to allow that, he said, without elaborating.
Tesla’s goal this year is to deliver at least 21,000 of its battery-powered Model S sedans, priced from $69,900. It plans to introduce the Model X mid-sized SUV in late 2014.
Tesla rose 0.6 percent to $95.37 at the close in New York. The shares have gained 182 percent this year, compared with a 13 percent increase for the Russell 1000 Index.
CEO Musk is Tesla’s largest stockholder, with 24 percent of company shares, according to data compiled by Bloomberg. Rising share prices for Tesla and SolarCity Corp. (SCTY), a solar power company where Musk is chairman, have increased his net worth to $5.7 billion, according to the Bloomberg Billionaires Index.
“Forgot to say one thing at Tesla annual shareholders meeting,” Musk wrote in a post on Twitter. “Just as my money was the first in, it will be the last out.”
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